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Sunwing`s leading 27 per cent share of the Mexico, Caribbean and Central America winter destination market could soon be eclipsed by the proposed merger of Air Canada (25 per cent) and Air Transat (23 per cent). The review of the proposed merger by the Commissioner of Competition is expected to be completed in early May. European regulators must also approve the merger.
Apart from Sunwing, Canadian consumers can also opt to fly WestJet, which has a healthy 22 per cent share of the sun destination market – one that’s predominantly an all-inclusive market versus an air-only market, according to a report by National Bank of Canada Financial Markets. There is also indirect competition from connecting flights on American and Mexican airlines.
The sun destination market is an important one for Canadian airlines and tour operators in winter, noted the report’s author Cameron Doerksen. He estimated total scheduled sun destination capacity (Nov.1-April 30) from Canada is up 2.2 per cent year-over-year, down from the 8.7 per cent growth seen last winter on the same basis. If charter flights are included, overall industry capacity is still only up 4.4 per cent. By comparison, capacity to Hawaii this winter is down 9.3 per cent while Florida capacity is up 5.5 per cent.
“Capacity growth was somewhat elevated last year, so the airlines have returned to more normalized growth this year, and Florida’s growth shows there’s still good demand for that market,” said Doerksen. “Higher capacity typically leads to lower prices and, conversely, capacity restraint facilitates pricing increases.”
Air Canada’s sun capacity growth of 6.1 per cent this year is “modest” compared to last year’s increase of 15.2 per cent, Doerksen pointed out. But the market represents only a small (5.2 per cent) component of the carrier’s total system capacity, he added.
To help offset capacity lost due to the 737 Max grounding, Air Canada is using leased Air Transat A330-200 aircraft on selected routes, namely Montreal-Cancun, Montreal-Puerto Vallarta and Montreal-San Jose (Costa Rica).
WestJet is adding 2.9 per cent more capacity this year, following 16.9 per cent growth last winter of its ultra-low-cost carrier Swoop. This winter, growth is focused on Mexico (up 5.9 per cent) and the Dominican Republic (up 5.8 per cent), offset by a decrease to Cuba (down 6.4 per cent) and the Caribbean Islands (down 5.4 per cent).
Sunwing announced it has more than doubled flights from Hamilton to destinations in Mexico, Dominican Republic, Jamaica and Cuba, including new flights to Cancun, Cayo Coco and Cayo Santa Maria. The airline has also partnered with Swoop to offer more travel options. As a result, customers can now book vacation packages with Sunwing that includes a Swoop flight from Hamilton, London, Abbotsford, Edmonton and Winnipeg.
“There are really no restrictions for any airline to add more capacity to sun destination markets. Indeed, since 2013, the number of total industry seats to these sun markets is up 42 per cent,” said Doerksen.
Looking at combined seat capacity on sun market routes, the report noted the only major market where Air Canada-Transat would have a significant concentration of seats (69 per cent share) is Quebec. By comparison, their combined share in Ontario is only 51 per cent. Sunwing also has a strong presence in Quebec and WestJet, which has a non-existence presence to sun markets from Quebec, has stated it plans to grow its share in Eastern Canada, including Quebec.